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tv   Nightly Business Report  PBS  May 12, 2015 7:00pm-7:31pm PDT

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this is "nightly business " with tyler mathisen and sue herera. >> you've got deal. verizon buys the company that introduced america to the internet aol. but will it create a new power house for content and connection. >> sharp and swift. bond yields hit a six-month high so what should have an investor do. >> crash test tummies, the results of some tests that have some drivers concerns red. all of that for "nightly business rep on tuesday, may 12th. >> good evening. a surprise marriage on wall street. verizon is buying aol for more than $4 billion in cash. while the two companies don't
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seem like a likely match. verizon is hoping that aol the disrupt can make it a more powerful player in an industry undergoing tremendous change. aol shares shot and verizon shares fell slightly. morgan brennan has more on the de why now. >> the one time king of mobile is all about mobile. verizon touches about 70% of internet traffic and by acquiring aol they will have better technology for selling ads and mobile. a fast growing market. aol said they decided itself to sell in a better market place that will be increasingly be dominated by large players. >> look forward in five years there will be massive global scaworks and there
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is no better partner than verizon. so it is not about selling the s about setting up for about the next five or ten years. >> and since they own tech crunch and tech gadget. and some say huff post could be spun off. the fact that the company aproviding internet connections with now producing the media people are going online for. and not just content creation but new consumption models particularly over the top video whic streaming over the internet without a tv and many companies including verizon are developing this kind of service to cater to cord cutters. and the drive rs force is the advertising technology. >> they are trying to put together a package of advertising assets and mobile assets for advertisers that i think are differentiated. so if you are trying to reach millennials and you want to reach them on a mobile platform
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verizon can offer ads something that other people won't. >> pending regulatory approval the acquisition is expected to close this summer. the aol ceo tim armstrong will stay on with verizon to build the content business. for "nightly business repor" i'm morgan brennan. before there was status updates, text messages and 140 character tweets there was aol it. was the company that launched the modern era for many of us and the original disruptor that brought america online on to something called the worldwide web and into the digital age but along the way the disruptor got disrupted. quantum computer used a messaging service back in 1989 which liy changed the world. young market whiz steve case saw the power of giving everyone access to the internet. so it is no accident it took the
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name american online in 1991 because it literally got america online brxt there was social media and snap chat and facebook there was aol with the im's and early chat rooms. former aol executives like regina lewis still marvel at what they accomplished minting tech millionaires along the way. >> they had the patent and the invention and a company ahead of its time. >> aol was a rising power in computing, in media, in communications and it was hungry for more. buying up companies like net scape, the browser service and movie phone. a history making merger with time warnerer $164 billion, the richest deal of all time finalized in 2001 but synergies were choked when the.com bubble
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bounced and there was a report of $99 billion, at the time the largest loss reported by any company. the market value of aol stock dropped from $226 billion to about $20 billion. by 2003 time warner dropped aol from its name and case resigned from the board and the aol future was in doubt. >> sometimes you might just be too farute in front. and aol is a classic example. a right concept, arguably wrong timing. >> and some would say a wrong business model. it was a dialup dinosaur in a broadband world. >> and then they spun off into a separate company. now aol is listening to verizon's siren song. but this is a new aol,
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reimagined under -- under ceo tim cronnel but the real value is in using math algorithms to give advertiserers a bigger bang for their bu especially when it comes to video. >> advertisers are asking more questions. not just writing a check, hey put that on the aol and that is what aol can offer. >> and in the last earnings report more than 2 million americanl use the dialup internet service, the service that made the funny names to get online. my old aol screen name time money man. there you have. the bid for direct tv is unlikely to be blocked by regulators. the justice department and the fcc are nearing a decision to clear the deal with some conditions. negotiations with at&t are expected to begin within days.
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on false stocks close lower after a steep selloff and by the close the dow jones lost 36 points to 18,068 and had been down as much as 180 points and the nasdaq dropped 18 and the s&p 500 low by six. and it was because of the bond market which saw the yield on the ten year note hit a six month high before it pulled back and it is the speed at which rates are rising that has investors cautious. dominic chu has more. >> borrowing costs are on the rise. and many of the rates that consumers pay for access to credit are tied to the rates on u.s. government bonds known as treasuries. the strong demand for owning those bonds forced prices higher and thus interest rates lower but that has reversed course over the past two weeks. >> venture rates have gone up primary because there are concerns about u.s. economic
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growth going away. we had a poor result in the first quarter sand things are looking better sand rates reflect that and oil prices are going up and that combination pushed interest rates higher. >> and that economic scenario makes bond and mixed payments to investors a less attractive investment and some experts are advising clients to look at certain parts of the stock market. >> going over the last tightening cycles stocks do lend into fed liftoff but over the subsequent 12 and 24 months, a diversified portfolio of dividend paying stocks has outperformed the broughter market. >> there might be a sense due for a breather but there is a sense for a trend. >> we do think the trend is higher for the year but not as
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big of a jump as we've seen recently. >> and the treasury bond market has an in fluns on credit card to mortgage rates. and it might be worth it to keep one eye on it in the future. for "nightly business report," i'm dominic chu. >> well that recent rise might be spooking some investors but our guest said you should keep calm and hold on to bonds. he has $34 billion under management. good to see you, bill welcome. >> sue, tyler, thanks for having me. >> it strikes me that perhaps this month in race may be a longer term trend we're seeing estas the trajectory the speed with which the bond yields have been moving. does that tend to pull back or self--correct i think is one of the words you used or not? >> yes. i would just preface my comments
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with saying i'm certainly sympathetic to investors who are alarmed by the route in the bond ma as it has been called or the fact that the fed is going to start raising interest rate sues but i can think of three reasons why investors should stay calm and maintain a balanced approach toward mixed income. many are sensitive to the market. like the housing market and if interest rates rise too hard too fast that will depress on the economy and will put downward pressure on interest rate and limit the rise. that is a limited that i think will contain the rise in rates. >> so the rates tend to self-correct. and just like with stocks you cannot time when rates will swing. though this rate move has all but telegraphed, bill forever. >> well if you look at for
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instance the philadelphia fed does a quarterly survey of professional forecasters and they have an obismal track record and you can look at the time history back to 202 and consistently quarter after quarter they call for a higher interest rate on the treasury and they have been too bearish on bonds so one had a to be -- has to be humble about forecasting interrates. >> and speak to me about the third point, diversification, do you mean along the bond yield and what funds? >> if investors pull back from the bond market and hideout for instance in cash they are sacrifice key diversifying benefits that a bond fund offers in a flight to quality if there is a bout of volatility in the equity market bond is a
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diversifier and goes up in price when stocks are going down and smooth out the bumps in an overall diversified powerball. and if you hideout and sacrifice bonds that can lose that diversification benefits. >> bill thank you so much for those points. bill irving with fidelity investments. and john kerry made the first visit to russia since the ukraine crisis to pete with putin. while they look at signs of easing tensions but it is unclear if any progress was made. jefz cut more has more from moscow. >> expectations running into the meetings were relatively low. it is after all, two years since the secretary of state has met with any senior russian leader. there are joint topics on the
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table that need progress one, syria, one iran and the ongoing negotiations over de-nuclearizatio and getting progress in ukraine toward a political solution. the day began with a replaying ceremony involving lavrov and kerry. they then went into four hours of talks. those talks were followed by discussions between president putin and the secretary of state. at this point it is difficult to tell whether any significant break-through has been made in thawing this chilly relationship. e do know as far as the russians are concerned any cooperation can only be achieved as if they say, americans treat them as equals. it is jeff cut more for "nightly business r from moscow. still ahead, why a key
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legislation that the president had blocked today by his own party. president obama's big trade bill was blocked in the senate by democrats. to the to pass a procedural hill bring the president into doubt. john harwood is following the developments in washington. what happened today and what happens next? >> democrats in the senate are concerned that the trade deal the president is trying to negotiate is bad for workers and the environment. the president like bill clinton before him thinks they would be good for the country as a whole. the democrats held up
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consideration. a temporary setback, the white house hopes. they are going to see what can satisfy the democrats to allow the debate to go forward but mitch mcconnell is his friend and harry reid and elizabeth warren are his enemies. >> this had to do with chooip and the interpretation they were not being hard enough on china. how much of that factored in today's events or is that put by the wayside? >> it is very important. democrats say the trade deal ought to include provisions that crack down on currency manipulation. china is who they have in mind there. the trade promotion deal they are seeking to pursue doesn't involve china but they want to make that part of the law. the administration's argument is china has already allowed the value of the yuan to rise but this is part of the negotiations
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over the next few days. the administration is going to try to figure out something that put the administration in a bad position but satisfy enough democrats. >> best guess, will he get enough votes or not? >> yes he will. >> simple and question. john harwood in washington. thank you very much. highway safety conducted new crash tests are raising questions about safety of popular mid size suvs. half of the ones put through a modern collision did not farewell as well. phil le low has more. >> one of the common and dangerous accidents, small ps where a vehicle's front corner slammed into a object at 40 miles per hour and cause almost a quarter of the injures and deaths linked to front end crashes. these show some popular suvs struggle to protect passengers in this type of zentd.
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>> what our current set of tests shows is mid side suvs offer better protection than others. >> the highway safety said the ford flex nissan murano and the durango had good performance. and the sante fe durango and cherokee were rated at margin all. but the dodge journey got a poor rating the lowest grade given by ii-s. >> what we're seeing for dodge-chrysler they ar performing pretty well but the older designs that have been around for a few years aren't offering the highest type of safety in this type of crash. >> despite this safety report jeep is red hot, and sales are soaring thanks to fresh designs and low gas prices making the prices soar. when asked about the crash test
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a spokesperson said no single test determines overall real-world vehicle safety. every fca usa vehicle meets or exceeds every applicable federal motor safety samples. >> in recent years there were and reliability reports that havee ranked jeep toward the bottom of auto brands but jeep is coming off the best year ever for sales. phil le beau "nightly business chicago. >> and to read more about the crash tests in mid side suvs head to our website at nbr.com. paulp is surging and that is where we beg the maker of the filtration systems is near the end of an auction which could see it sold for more than $10 billion and that could include dina mo and sherman. and shares of paul company up to
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$118.62. >> and more trouble for lumber liquidators, facing lawsuits and investigations over allegations of high levels of formaldehyde in the wood products and now the company 's insurance carriers are balking at paying coverage for the debacle. shares fell 5% to $26.60. the s.e.c. has announced fraud charges against the cfo and cie over the educational services for the for profit college concealed student loans which were guaranteed by investors. shared plummet to $2.20. and reaction to the gaps same-store sales tumble in april. the stronger dollar is hurting revenue. shares fell 4% to $38.36.
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this week is a big one for retailers and the consumers. tomorrow macy's and jcpenney report earnings and the government will release retail sales for april and retailers are working hard to get consumers spending and many are making a bet on new technology. courtney reagan has more. >> shopping may not know what a beacon is but retailers are betting big on the $5 hardware hoping the technology will increase in store sales and traffic. macy's wal-mart and simon properties are amo experiments with beacons and the integration into smartphone apps. so what is a beacon? >> it enables apps to be woken up. think about an app you might have on your phone and you download it and took the time to
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download i it because it is on page six of their phone and this allowed them to wake up the app and deliver a message to you. >> it will send a welcome message and reward consumers for points for shopping and send a reminder about something on a shopping list or coupons and promotions. and timing is everything. beacon delivers messages with more geographic precision than another technology with the ability to send you a customized promotion for your favorite food while you ar browsing the aisle. >> brick and mortar stores can use that. >> this is pushing a personalized message to a shopper without pushing the privacy boundaries. >> i don't typically use coupons but if it was in my phone,
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because i don't like carrying the paper, i would be more likely to use something relevant to using my shopping behaviors. >> whether you want to do it or opt out of it that is something interestin it will bring you to the and let you know what deals are going on. >> simon group has 190,000 beacons and the mall operator is still testing the technology and calls it potentially transformational. while the forecast por beacon sales is $4 billion this year a report from b.i. intelligence expects it to grow by a factor of ten to $44 billion in 2016. potentially making a $5 beacon a game-changer for brick and mortar retail. for "nightly business report," i'm courtney reagan. >> coming up the industry that is really feeling the heat as california's devastating drought
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rages on. here is what to watch tomorrow. the government releases retail sales for april and macy's and jcpenn will tell us what they most and dupont holds the annual meeting tomorrow and that is what is on the agenda for wednesday the 13th. water and the lack of it is california's biggest challenge right now. and it is not just farmers being scrutinized for the use of that resource. the bottled water business is also feeling the heat. jane wells has more from los angeles. >> at a time when lawns are
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going brown and californians are being told there is only a year's worth of water leave in reservoirs inside plants like this one water is being put in millions of bottles every day, to be sold to consumers in other states. >> the governor created a plan 3.5 weeks ago but nothing was said about water bottling or fracking. >> natural springs and other sources provide water for the bottling industrial but no one knows how much water is being used. now a lot of people want to know and water bottlingers are facing a flood of criticism. starbucks has been bottling the ethos water but will find a new spot outside of the state in the next few months. after arrowhead sources in california for over a century, said changing causes its own concerns. so it down makes a
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difference even though nobody knows how much water is bottled in the bucket it is a proverbial drop in the bucket. only a small fraction is bottled water. but every drop is under scrutiny. and even though some have rights to water sources, there is very little oversight points out using it uses less water, there is a demand on a moratorium on bottling water in the state until the water depression is over. >> the idea is absurd. >> some suggest that idea is holding water. >> jane wells, los angeles. and a world record set in the art record. pablo picasso algiers set the record the highest level sold
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at action. as we told you last night, some expected the piece to sell for $140 million. the buyer chose to remain anonymouswow. that is a lot of cash. that will do it for "nightly business tonight. i'm sue herera. >> and i'm tyler mathisen. have a great nice everyone. and we hope to see you right back here tomorrow night.
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